Marrying retail's art and science

Merchandise planners proving to be bright spot in a sector bleeding jobs

NEW YORK (MarketWatch) -- With unemployment in the retail industry far outpacing the national average, those entrusted with making sure the right number of the right styles hit the right stores at the right time are perhaps among those in the business with the best job security.

That job, typically called merchandise planning, has taken on greater importance as stores battle slumping demand and customer traffic in the face of the recession and rising unemployment. The result of failed or ignored merchandising planning can be lethal. A store either will have excess stock that needs to be cleared out, at a time when retailers already are offering profit-eroding discounts to entice demand, or will suffer from missed sales, which are needed more than ever once an item turns out to be a hit.

Inventory control, while always critical, has become the retail industry's big buzzword since the recession led to consumer cutbacks and made predicting demand all but impossible. Retailers have been in a mad dash to eliminate jobs, shut stores and lower other expenses as they seek to control cash and capital spending, while lenders are reluctant to give credit and demand that inventory to be used as loan collateral.

"You can be sitting on the right product in the wrong place," said Lululemon Athletica Inc.
LULU, -0.19%
Chief Executive Christine Day in an interview. "In an environment where you can't get credit, your inventory sitting in warehouses ties up the cash. Everybody is heightened about inventory control."

Since Day, a Starbucks Corp. veteran, joined the hip yoga-inspired clothing retailer about two years ago, the Vancouver, Canada-based company has created a new 40-person merchandise planning and allocation staff to take over a task handled by its 20-person designer group, which was in charge of creating the products consumers want.

The retailer credited the planning team in helping it increase inventory turnover and shave a month off what was once a 10-month cycle time -- from product design to delivery on store shelves -- with the goal to shorten it by another two months, Day said. In the fourth quarter, she added a "speed to market" group to help get hot-selling products out even faster, in 14 to 45 days.

Sitting next to the head cheerleader

"When times are down like this, there's a major effort to improve the store productivity and overall asset productivity," said Craig Johnson of retail consultant Customer Growth Partners. "We aren't adding a lot of stores right now. With merchandising planning and allocation, you are able to get the most bang for your buck and maximize the percentage of your merchandise that you sell at full price. The better job you do, the greater return you can realize out of your inventory."

As a cost item, inventory represents 40% to 50% of a retailer's sales -- bigger than staffing costs and store-lease expenses, according to Johnson. With the rising significance of inventory control and merchandise planning, the profile of such an executive also rises.

At executive-recruiting firm Berglass + Associates, placements for merchandising-planning executives have jumped tenfold in the past three years, putting it along with recruitments for online-commerce and supply-chain executives as the three key growth areas at the firm, which has helped Talbots Inc.
TLB, +0.00%
and Limited Brands Inc.'s
LTD, +6.84%
Bath & Body Works make merchandise-planning placements in the past two years.

The planner executive also was elevated in the corporate ranks from an advisory position to a top management role, said Leslie Berglass, chairman of the firm bearing his name.

"These are the people who were in the background," Berglass told MarketWatch. "Now they sit next to the head cheerleader. The CEO would listen to that person. Inventory is the biggest variable expense retailers can control."

Emotion and analysis

The idea that merchandising planning deserves its own separate team and responsibility looks to be a more recent concept. The job of planning and allocating assortments to stores, like in Lululemon's case, used to be part of the work of designers, merchants or buyers, who already were charged with creating, picking or buying merchandise. The Labor Department, for instance, still defines planning as part of the job of a retail buyer.

That's beginning to change as retailers add or update planning software and seek to inject some science and analytics to an industry more known for its art and instinct, analysts said.

While there's no specific government or private figures available that track the actual increase in the number of merchandise planners, the anecdotal evidence suggests that the category has been among the few lucky functions being spared the ax when the industry itself is shedding jobs.

Retail employment has fallen an average of 44,000 each month since peaking in November 2007, according to the Labor Department's Bureau of Labor Statistics. The unemployment rate in the wholesale and retail trades in March jumped to 9%, with the number of unemployed in the industry almost doubling to 1.85 million from a year earlier, the bureau's data show. In comparison, the national unemployment rate rose to 8.5% in March.

When Macy's Inc.
M, -1.65%
in February said it was cutting about 8,200 jobs as it consolidated its different regional offices and centralized functions such as finance, information technology and human resources, it also added 1,200 new positions -- mostly district merchants and district planners, part of its national rollout of My Macy's localization efforts.

Retailers from Macy's to Wal-Mart Stores Inc.
WMT, -0.74%
are localizing their assortment based on individual markets, or making them more exclusive to differentiate from rivals.

"The buyer gets too emotionally attached to the product," said Antony Karabus of retail-consulting firm Karabus Management, a unit of PricewaterhouseCoopers Canada. "They may buy too much. A planner has very strong analytics. Increasing the ratio of planners to buyers has taken on so much more importance, given the need for more precise inventory management. You are also freeing up more time for the buyers to think of what they can get to be differentiated from the competitors."

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.